Correlation Between Song Hong and Vietnam National

Can any of the company-specific risk be diversified away by investing in both Song Hong and Vietnam National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Song Hong and Vietnam National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Song Hong Construction and Vietnam National Reinsurance, you can compare the effects of market volatilities on Song Hong and Vietnam National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Song Hong with a short position of Vietnam National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and Vietnam National.

Diversification Opportunities for Song Hong and Vietnam National

0.62

Correlation Coefficient

Song Hong  Vietnam National

Poor diversification

The 3 months correlation between Song and Vietnam is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and Vietnam National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam National Rei and Song Hong is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Song Hong Construction are associated (or correlated) with Vietnam National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam National Rei has no effect on the direction of Song Hong i.e., Song Hong and Vietnam National go up and down completely randomly.

Pair Corralation between Song Hong and Vietnam National

Assuming the 90 days trading horizon Song Hong Construction is expected to under-perform the Vietnam National. In addition to that, Song Hong is 1.64 times more volatile than Vietnam National Reinsurance. It trades about -0.03 of its total potential returns per unit of risk. Vietnam National Reinsurance is currently generating about 0.18 per unit of volatility. If you would invest  2,163,636  in Vietnam National Reinsurance on December 5, 2024 and sell it today you would earn a total of  326,364  from holding Vietnam National Reinsurance or generate 15.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.14%
Values	Daily Returns

Song Hong Construction  vs.  Vietnam National Reinsurance

Song Hong Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Song Hong Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Song Hong is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vietnam National Rei

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam National Reinsurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Song Hong and Vietnam National

The main advantage of trading using opposite Song Hong and Vietnam National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong position performs unexpectedly, Vietnam National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vietnam National will offset losses from the drop in Vietnam National's long position.

The idea behind Song Hong Construction and Vietnam National Reinsurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.